The Business Concentration Law, another part of which has now been approved by the Knesset Finance Committee, is still riddled with holes, omissions and other problems, but we’ll deal with these in the coming days, months and years.
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Sometimes, however, a look at the broader picture is called for. On Tuesday, a climax was reached in the battle against the business pyramids and concentration that had taken over the Israeli economy during the past seven years.
In the coming days and weeks, many in the political and regulatory worlds and the press will attack the Knesset’s achievement. What distinguishes them is that most didn’t lift a finger over the years to point out the concentration that corrupted the economy or to reduce it.
A string of Knesset members and cabinet ministers who rushed to jump on the bandwagon over the past year completely absented themselves from the committee’s effort to tighten the proposed restrictions and block attempts by the tycoons to soften them. Notably missing was Finance Minister Yair Lapid, who canceled his appearance before the committee. Moreover, Knesset members from his faction opposed some of the proposals for a tougher approach toward concentration.
His brother-in-arms, Naftali Bennett, who was appointed to spearhead the attack on concentration, also has yet to display a fighting spirit. Thus it was left to Knesset members like Gila Gamliel (Likud), Yitzhak Cohen (Shas), Merav Michaeli and Erel Margalit (Labor), Zahava Gal-On (Meretz) and Elazar Stern (Hatnuah) to take the lead in stiffening the provisions.
It was particularly amusing to see how the feminist Michaeli and the ultra-Orthodox Cohen joined forces. Michaeli reminded the committee that the purpose of the law was to end the concentration of business interests, while Cohen followed by saying that the purpose is to restore to the public NIS 2.7 trillion that was taken from it.
“The time has come to end feudalism in the capital market,” Cohen said.
The crucial next step
Feudalism in the Israeli capital market is slowly starting to crumble, but it still has a long way to go. Discussions on taking financial institutions out of the hands of the tycoons − better known as “severing the link between nonfinancial and financial enterprises” − are just beginning.
The proposal that the government brought to the committee isn’t good: It allows some of the people controlling the banks to continue holding nonfinancial businesses. The separation between institutions managing the public’s savings and pensions and the people borrowing and using this money for their business needs should be hermetic and complete.
The moment we’ve internalized the clear and present danger in links between the financial and the nonfinancial, between our money and the tycoons − and the resulting damage to the economy, the management of the public’s money and the organizational culture of the companies that manage this the money, as well as their conflicts of interest − no compromise can be made.
The separation must be absolute. The priests running the temple where our pensions, our money, are kept must be completely pure. The separation needs to happen immediately: Four years, six years or more can’t elapse before our money is separated from the tycoons. All financial institutions must disengage immediately and be cleansed of conflicting interests.
The coalition and opposition Knesset members who spearheaded the dismantling of the pyramids and their restriction to two tiers − in defiance of the government’s hesitant stance − need to take the same responsible and courageous approach over the coming days and demand an immediate and absolute separation of the financial and the nonfinancial.
Brave and pioneering Knesset members must stand up at this stage and propose solutions for the question of who will form the controlling interest at banks and financial institutions. How is it that a small group of people at the head of these institutions controls billions of shekels, with weak corporate governance and ineffectual boards whose members belong to “the club” and couldn’t act independently even if they wanted to?
The process of breaking up the Israeli economy’s concentration has gotten underway, but will be long and difficult. Knesset members need to take advantage of the enormous public support that has been generated over the past year for making the capital market and business sector fairer and more democratic. Any hesitation or stuttering on their part, and the club will regain control − not just over our capital market, not just over our business sector, but also over our democracy. As U.S. Supreme Court Justice Louis Brandeis put it: They will control the nation using the nation’s money.